Rand Rebounds to Pare Worst Week in Four on Record Bond Outflows

South Africa’s rand rebounded from a 4 1/2-year low to pare the biggest weekly fall in four that was fueled by the longest stretch of bond outflows on record.

Signs the U.S. economy is recovering outweighed concern the Federal Reserve will bring forward plans to taper stimulus. Foreign investors dumped South African bonds for a 12th straight day yesterday in the longest streak of sales since Bloomberg began compiling data from the Johannesburg Stock Exchange in 1996. Africa’s largest economy relies on capital inflows to fund its current-account gap, which swelled to a four-year high in the third quarter.

The rand strengthened 1.3 percent to 10.3150 per dollar as of 5:06 p.m. in Johannesburg, the currency’s first advance in five days. That helped pare its weekly decline to 1.4 percent, its worst drop since the five days through Nov. 8. The rand earlier weakened as much as 1.3 percent to 10.5828 per dollar, the lowest intraday level since March 2009.

The South African currency rebounded today because the slide “looks considerably overdone,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd., said by phone from Johannesburg, predicting a strengthening back toward 10.20 per dollar by the end of the year.

The U.S. added more workers than forecast in November and the jobless rate dropped to a five-year low of 7 percent, Labor Department figures showed today in Washington. That followed better-than-estimated jobless claims and economic growth figures yesterday. The rand has weakened 18 percent this year.

‘Under Pressure’

“We had numerous strong U.S. data points this week, including jobless claims, gross domestic product and new home sales,” John Cairns, a currency strategist at FirstRand Ltd.’s Rand Merchant Bank unit, said by phone from Johannesburg today. “Most emerging markets came under pressure.”

The Johannesburg Stock Exchange paused trading for five minutes at 11 a.m. to pay respect to former President Nelson Mandela, who died yesterday.

“While his passing will certainly have an impact on market conduct, it shouldn’t be a factor that weighs negatively on pricing in domestic financial markets,” RMB’s Cairns said.

Foreigners sold a net 1.67 billion rand ($159 million) of bonds yesterday, bringing the selloff this month to 5.14 billion rand, according to the Johannesburg Stock Exchange. The deficit on South Africa’s current account, the broadest measure in the trade of goods and services, widened to 6.8 percent of gross domestic product in the three months through September from a revised 5.9 percent the previous quarter.

Yields on bonds due December 2026 fell eight basis points, or 0.08 percentage point, to 8.37 percent, compared with 8.32 percent a week ago.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE